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Hopes of finalising an interim trade deal between India and the United States ahead of the looming August 1 tariff deadline have reportedly faded.

Citing two Indian government officials familiar with the matter, Reuters reported that negotiations have gotten stuck over key issues such as tariff reductions on agricultural and dairy products.

Despite five rounds of discussions, the latest led by chief negotiator Rajesh Agrawal in Washington, the two sides have failed to narrow their differences, the news agency reported.

“An interim deal before August 1 looks difficult, though virtual discussions are ongoing,” one government official said. A US delegation is expected to visit New Delhi shortly to continue the dialogue.

At the heart of the impasse is India's reluctance to open up politically sensitive sectors such as agriculture and dairy, while Washington remains firm on not rolling back higher tariffs imposed on Indian exports of steel, aluminium, and automobiles. The talks are now shifting towards the possibility of postponing these contentious issues to future negotiations, the report pointed out, citing another source.

Tariff Risks Loom Over Key Export Sectors

In April, US President Donald Trump threatened to impose a 26 per cent tariff on Indian imports. While implementation was put on hold to allow room for negotiations, that pause expires on August 1. Notably, India has not yet received a formal tariff notification—unlike over 20 other countries—leaving the door open for further discussions.

Trade experts warn that failure to reach an agreement could have immediate consequences. Ajay Sahai, director general of the Federation of Indian Export Organisations, cautioned that industries like gems and jewellery could face serious disruption if the tariffs come into force. “However, this could be temporary, as both countries aim to sign the deal over time,” he added.

Meanwhile, US Treasury Secretary Scott Bessent told CNBC on Monday that the administration prioritises the quality of trade deals over timelines. When asked whether countries engaged in talks could see a deadline extension, Bessent said it would be a decision left to President Trump.

Indian officials remain cautiously optimistic about securing a broader agreement by September or October, as discussed during the February meeting between Prime Minister Narendra Modi and President Trump. “Given that there have been five rounds of negotiations and another US delegation is expected, we remain optimistic about finalising a trade pact,” reported a third government source.

The news organisation further revealed that neither India’s commerce ministry nor the Office of the US Trade Representative responded to any of its requests for comment. It added that all officials quoted requested anonymity as the negotiations are ongoing and confidential.